Lenders look at a wide variety of factors, not just credit scores, to determine who they believe is creditworthy enough to borrow money. Keep reading to learn what it means to be creditworthy, what lenders may consider before they loan you money and what factors into your credit score.

What Does it Mean to be Creditworthy?

You’ve probably heard the term creditworthiness while researching for ways to borrow money, like taking out a personal loan. Essentially, if you’re creditworthy — you’re worthy of credit — just like the name implies. Creditworthiness is determined by factors like your payment history, credit score and how much debt you owe.

3 things lenders may consider when making a decision on a loan application

Information you provide on your loan application.

Information provided about you by the credit bureaus, including your credit score.

How much money you owe compared to how much money you earn—aka, debt to income ratio.

What Factors Into Your Credit Score

Payment History
Your payment history is the most important factor in your credit score, representing 35% of the total score. The reason for this is simple — lenders want to make sure you have a history of paying back the money you borrow.

Amount Owed
To determine if you’re a good credit risk, lenders also want to make sure you use credit responsibly and will look at your credit utilization ratio which is the amount you owe compared to the available credit on your accounts. The amount you owe accounts for 30% of your overall score.

Length of Credit History
The length of your credit history makes up 15% of your credit score. The amount of time you’ve had credit matters to lenders because it shows how long you’ve been managing credit responsibly.

New Credit
Having older accounts may positively impact your credit score but too many new accounts could do just the opposite. Credit inquiries and new accounts make up 10% of your overall score.

Credit Mix
Lenders like to see that you’re able to manage different types of credit including revolving accounts and installment loans. This is what’s known as your credit mix — making up another 10% of your credit score.